Using a Rasch Model to Rank Big Pharmaceutical Firms by Financial Performance

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Abstract. We explore a Rasch approach to ranking the top 15 firms in the pharmaceutical industry by their overall financial performance. Using an initial set of ratios spanning multiple dimensions of firm financial performance, we select the ratios that are compatible with the requirements of the Rasch model for this industry during 2002-2013. We then identify the firms that most frequently ranked among the top five performers. Three firms stand out as consistently disclosing the required data and showing up at the top of the performance spectrum. Our approach offers a new perspective on the valuation of managers and their firms.

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